In the most important news for same-sex couples since the Supreme Court struck down the Defense of Marriage Act (DOMA) in June, the Internal Revenue Service issued a press release on August 29 stating that it has ruled that, for federal tax purposes, all same-sex couples who married legally in jurisdictions that recognize their marriages will be considered married. That means that a same-sex couple who married in, say, the District of Columbia but lives in Virginia will be considered married by the IRS, even though the state of Virginia does not recognize same-sex marriages (or same-sex relationships of any sort).
In other words, married same-sex couples will have the same legal rights and obligations under the Internal Revenue Code as heterosexual couples, regardless of where that same-sex couple lives. The will have to file their 2013 taxes – jointly or separately – as married and incur the benefit or “marriage tax,” depending on their particular circumstances, of filing in that status. They will also now be able to put their same-sex spouses on their employer-provided health insurance with the two-fold tax benefit of (1) not having to pay taxes on the health insurance premium subsidy provided by their employer for their spouse’s insurance and (2) having the employee share of the health insurance premium for their spouse’s coverage, like the premium for the employee’s coverage, taken out of pre-tax income. To name a few other consequences, if a same-sex couple divorces, the couple will be able to divide, transfer, and retitle property without tax consequences, and when a spouse dies, the part of the estate going to the surviving spouse will not be subject to estate taxes.
Even before the IRS ruled on the question, it was clear that married same-sex couples living in states like Maryland and Massachusetts, which recognize their marriage, would be treated the same for tax purposes as heterosexual couples – one of the most important consequences of the Supreme Court’s decision in U.S. v. Windsor, striking down DOMA. What was not clear was whether married same-sex couples living in states that do not recognize their marriage would be considered married for federal tax purposes. For them, the IRS ruling is huge.
In its August 29 ruling, the IRS also made clear that same-sex couples who married in previous years and want to amend their tax returns to change their filing status to married can do so “for one or more prior tax years still open under the statute of limitations.” They can also seek refunds for taxes they would not have paid if their marriage had been considered legal.